ClientEarth response to BEIS Consultation on Mandatory Climate-related Financial Disclosures

Despite clear investor demand, companies in the UK consistently fail to disclose material climate-related information to financial markets – likely breaching the law.

The Department of Business, Energy and Industrial Strategy’s (BEIS) proposals to enhance climate change-related disclosure obligations for publicly quoted companies, large private companies and LLPs are welcome, but inadequate. Unless the proposals are improved, they will not achieve the Government’s objectives of mitigating climate change-related risks for companies and investors and smoothing the transition to net-zero. We are concerned that, although the consultation claims that its proposals introduce mandatory disclosures in line with the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations, the content of the proposals do not make the disclosures mandatory in practice, and propose a standard of disclosure that differs from the TCFD’s recommended disclosures.

To achieve its objectives, the Government must amend the proposed disclosure obligations to:

• require companies to disclose against each of the TCFD’s 11 recommended disclosures in its July 2017 Final Report;
• make the proposed disclosure obligations mandatory in practice, not just in name, and avoid a confusing ‘comply or explain’ approach;
• require companies to disclose a Paris-aligned strategy and financial accounts, with a credible plan for emissions reduction;
• provide financial regulators with effective accountability and enforcement powers;
• require auditors to provide assurance in relation to these disclosures; and
• expand the scope of the proposals to cover all companies that satisfy the criteria for large companies under the Companies Act 2006.